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Seriously, It's Just a Number

Disclaimer; I’m going to address a financial subject that I find to be controversial. Here is it–the FICO score.

Huh?

It’s also referred to as a credit score. Now you get it. The fact that anyone needs to rely on one at all is up for debate, in my humble opinion, but that is not the subject of this post today. We are going to pretend for a minute that I really care about credit scores (which I don’t, and I’ll explain why) and all learn something together.

“A FICO score is a credit score created by the Fair Isaac Corporation” (thus FICO, their symbol on the New York Stock Exchange). “Lenders use borrowers’ FICO scores along with other details on borrowers’ credit reports to assess credit risk and determine whether to extend credit. FICO scores take into account data in five areas to determine creditworthiness: payment history, current level of indebtedness, types of credit used, length of credit history, and new credit accounts” (https://bit.ly/3zeBkcW).

I heard Dave Ramsey say something akin to this; the credit score grades your relationship with debt. Many companies, even ones that have no business doing so (like auto insurance companies and potential employers), in my opinion, “run your credit” to see if you are worthy of their time and attention. They don’t seem to understand that if you have zero debt and no credit accounts open, your credit score will be zero. Seeing a zero freaks them out, and they don’t know how to process it.

I could care less about my credit score because I have no intention of borrowing money from anybody ever again, not even for my next home purchase. But I digress…

Because MOST people have some form of debt and are caught up in the credit score merry-go-round, we must address the idea of credit scores. So, note to self, we should learn to care about our credit score and thus take care of our credit score. So, how do we go about it?

Check out annualcreditreport.com for reports from each of the three credit reporting companies. Make sure they are accurate. Reach out to them if they are not. Close old yet still open accounts with zero balances. Even consider freezing your credit since you are no longer relying on debt and, like me, don’t intend to borrow any more money. This will also help protect you from identity theft.

While I may not agree with the need for this rating system, I do understand that if you have one you want it to remain in good shape. So, take care of it. Rant over.

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